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What is Share certificate?

Posted On June 29, 2011 by &filed under .

A share certificate is a document issued by the company stating that the person named therein is the registered holder of specified number of shares of a certain class and they are paid up upto the amount specified in the share certificate. The share certificate must bear the common seal of the company and also must be stamped under the relevant stamp act. One or more directors must sign it .It should state the name as well as occupation of the holder and number of shares , their distinctive number and the amount paid up.

Every company making allotment of shares must deliver the share certificate of all shareholders within three months of allotment. In case of transfer of shares, the share certificate must be ready for delivery within two months after the shares are lodged with the company for transfer. If default is made in complying with the above provisions, the company and every officer of company who is in default is liable to punishment by way of fine which may extent to Rs500 for every day of default. The allotee must give notice to the company reminding of its obligation and even then, if default is not made good within 10 days of the notice, the allotee may apply to the Company Law Board for direction to the company to issue such share certificate in accordance with the Act. Application for this purpose must be made with the concerned regional bench of the Company Law Board by way of petition. The petition should be accompanied by the following documents :-

1.Copy of the letter of allotment issued by the company

2.Documentary evidence for the allotment of the shares or debentures for transfer

3.Copy of the notice served on the company requiring to make good the default

4.Any other correspondence

5.Affidavit verifying the petition

6.Bank draft evidencing payment of application fee

7.Memorandum of appearance with the Board copy of resolution of the board for the executive Vakalat Nama as the case may be Companies act does not prescribe any form for share certificate.

A Shareholder must keep his share certificate in safe custody or in case of shares which are traded in demat mode, with the depository. The company may renew or issue a duplicate certificate if such certificate is proved to have been lost or destroyed or having being defaced or mutilated or torn or is surrendered to the company. However, if the company, with the intention to defraud issues duplicate certificate, the company shall be punishable with the fine upto Rs10000 and every officer of the company who is in default with imprisonment upto 6 months or fine upto Rs10000 or both.

Once a share certificate is issued by the company, the name of the person in whose favour it has been issued becomes the registered shareholder. Nobody can then deny the fact of his being the registered shareholder of the company. Similarly, if the certificate states that on each of shares a certain amount has been paid up, nobody can deny the fact that such amount has been paid up

Once a charge is registered, it acts as a notice to the public at large that the charge holder has an interest in the charged property. No person can take a defense against the charge holder that he was not aware that a charge was created against the property. That person will be entitled to the property subject to the interest of the charge holder. Once certificate of charge is issued by the Registrar, it is conclusive evidence that the document creating the charge is properly registered.

A company must file within 30 days of creation of a charge with the Registrar complete details of the charge together with the instrument of charge or its verified copy in respect of certain charges. Otherwise the charge will be void. This does not mean that the creditors cannot recover their dues. It merely means that the benefit of the charged security will not be available to them. The following charges are compulsorily registrable :-